(Recasts with new prices, comments.
By Sandor Peto and Jason Hovet
BUDAPEST/PRAGUE, Jan 12 (Reuters) - Central Europe's
currencies fell in hectic trade on Monday as heightened fears of
a severe global slowdown boosted risk aversion, prompting
investors to sell emerging market assets.
The Romanian leu <EURRON=> traded near all-time lows over
concerns the country's large current account deficit leaves it
vulnerable in the economic downturn while the Polish zloty and
the Hungarian forint also fell sharply.
Fears for health of the global economy have grown following
a slew of poor economic data releases and thousands of job
losses across the developed nations.
"Risk aversion in the world has strengthened, equity markets
are sliding while the funding currencies... are gaining," one
Budapest-based dealer said.
The region's currencies have come under pressure due to weak
risk appetite for central European assets, after a short-lived
rally to start 2009.
They are expected to remain jittery even though Russia and
Ukraine signed a deal to help secure the resumption of gas
supplies to Europe, which were cut off last week, posing
additional risks to economic growth in the region. []
The leu <EURRON=> hovered near a new all-time low of 4.3250
per euro hit earlier on Monday and dealers said the currency can
weaken further if the central bank does not resume market
interventions which its stopped late last year.
Some market participants believe that the battered leu can
consolidate only if the country secures a rescue package from
the International Monetary Fund and the European Union, similar
to financing granted to neighbouring Hungary late last year.
"We expect Romanian assets to remain under pressure until
there are signs of a credible macroeconomic framework supported
by an IMF arrangement," Citigroup analysts said in a note.
"With EUR/RON trading around all time high levels we think
discussion of external assistance will intensify. We would not
add longs in EUR/RON at current levels," UniCredit analysts
said.
The forint <EURHUF=> weakened by 1.19 percent to 280.40 to
the euro by 1503 GMT, its weakest level since late October,
while the Polish zloty <EURPKLN=> shed 1.24 percent to 4.082 per
euro.
The Czech crown lost only 0.41 percent to 26.733, supported
by some corporate demand.
While the leu's falls are the most spectacular, it was hard
to name a currency which led the region, dealers said, adding
that the hectic pattern and low risk appetite was common in
emerging markets also including the South African rand and the
Turkish lira.
Meanwhile, government bonds in the region were mixed. Polish
bonds firmed, with buying from foreign investors, while
Hungarian bond prices fell in tandem with the weakening of the
forint.
"The forint has eased and the market has slowly started to
price out the (50 basis point) central bank interest rate cut
(earlier expected for Jan. 19)," one trader said.
"Short FRAs (Forward Rate Agreements) still price in 25
basis point, but we will see what happens," the trader added.
Elsewhere, Serbia's dinar <EURRSD=> started the week
stronger after weeks of falls as banks unloaded long euro
positions amid weak client demand.
The central bank sold 3.5 million euros at 92 dinars.
"Many banks went long on euros last week and are now
selling, but the client demand is not so strong," one currency
trader said.
--------------------------- MARKET SNAPSHOT ------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.733 26.624 -0.41% +0.07%
Polish zloty <EURPLN=> 4.082 4.032 -1.24% +0.8%
Hungarian forint <EURHUF=> 280.4 277.11 -1.19% -6.39%
Croatian kuna <EURHRK=> 7.336 7.325 -0.15% +0.39%
Romanian leu <EURRON=> 4.301 4.242 -1.39% -7.14%
Serbian dinar <EURRSD=> 92.321 94.15 +1.94% -3.18%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -18 basis points to +165bps over bmk*
5-yr T-bond CZ5YT=RR 0 basis points to +171bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +323bps over bmk*
5-yr T-bond PL5YT=RR -14 basis points to +273bps over bmk*
10-yr T-bond PL10YT=RR -11 basis points to +235bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -42 basis points to +844bps over bmk*
5-yr T-bond HU5YT=RR -55 basis points to +773bps over bmk*
10-yr T-bond HU10YT=R R +6 basis points to +607bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1603 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
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Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
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Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, writing by Jason Hovet/Sandor
Peto)
